A recent court decision has sparked interest as it delves into the complex legal landscape of corporate mergers and alter ego liability. On September 24, 2024, Chris Haas and others filed a complaint in the Court of Appeal of the State of California against Driven Deliveries, Inc., and its corporate officers. The case also involves Stem Holdings, Inc., which is appealing a judgment that implicates them in the financial liabilities of Driven Deliveries.
The case originated in May 2020 when plaintiffs Chris Haas, Carla Baumgartner, and Eric Steele brought action against their former employer, Driven Deliveries, alleging breach of contract, fraud, and employment-related claims. A settlement was reached where Driven agreed to pay $774,621 over 17 months. However, payments ceased by November 2021. Subsequently, Stem Holdings acquired Driven through a merger agreement on October 5, 2020. This agreement led to complications regarding who holds financial responsibility for Driven's debts post-merger.
Stem Holdings argues they should not be liable for Driven's debts as they only acquired shares and did not assume its liabilities. Despite this claim, plaintiffs assert that statements made during the merger process implied Stem would assume these obligations. Specifically, they point to a Form S-4 filed with the SEC indicating Stem would assume Driven’s outstanding indebtedness.
Plaintiffs are seeking to amend the judgment to include both Salvador Villanueva—deemed an alter ego of Driven—and Stem Holdings as judgment debtors. They argue that Villanueva controlled litigation processes and wrote settlement checks from his other company’s account while assuring payment continuity. For Stem Holdings, plaintiffs contend that due to the merger terms and prior assurances from executives like Brian Hayek—who later joined Stem—the company should bear responsibility for unpaid settlements.
The trial court ruled in favor of adding Villanueva as a debtor but found insufficient evidence to hold Stem liable under successor liability laws across multiple states including California and Delaware. The court noted that there was no express agreement binding Stem to the settlement obligations despite implications from merger documents.
Representing the plaintiffs are attorneys Gregory D. Wolflick and Theodore S. Khachaturian from Workplace Rights Law Group. The defendants are represented by Timothy L. Alger from Alger Law for Stem Holdings and Scott A. Sheikh from The Sheikh Law Firm for Salvador Villanueva. Judge Monica Bachner presided over the case with Case ID B326612.